Legere is on the way out!

One of the most colourful, and successful characters in recent telco history is on his way out of T-Mobile US.

Few CEOs exit a telco with an enhanced reputation, but such is the success of T-Mobile US under his leadership, John Legere has almost completed an impossible to follow act. Perhaps this could be likened to the retirement of Manchester United Manager Sir Alex Ferguson or US tennis superstar Pete Sampras; how do you follow-up such impressive accomplishments?

Legere’s contract will expire on April 30, 2020, with current COO Mike Sievert taking over as CEO. Legere will remain as a board member of the company, tasked with overseeing the transition of the business as Sprint and T-Mobile US merge into a single entity. His future has not been confirmed just yet, though rumours emerged last week he was being groomed for the top-job at shared-workspace giant WeWork.

“John Legere has had an enormously successful run as CEO,” said Tim Höttges, CEO of parent company Deutsche Telekom.

“As the architect of the Un-carrier strategy and the company’s complete transformation, John has put T-Mobile US in an incredibly strong position. I have the highest respect for his performance as a manager and as a friend, I am very grateful to him for the time together.”

While Legere has formed a reputation as one of the more controversial and colourful characters in the US telco space, he should also be remembered as one of the most successful.

When Legere was appointed as CEO in September 2012, T-Mobile was not in an enviable position. Less than a year earlier, T-Mobile US looked like it would be merged into the AT&T business, only for the Department of Justice to step-in on the grounds of competition. At the end of 2012, T-Mobile US and MetroPCS Communications merged to create a consolidated fourth player with more spectrum, scale and investment potential. In 2013, Legere took control of the company’s fortunes with the launch of the ‘Uncarrier strategy’.

Over a six-year period, Legere’s magenta army have introduced numerous ‘Uncarrier’ offers which have proven to be highly disruptive to the US telco industry. For example, Uncarrier 4.0, known as Get Out of Jail Free Card, saw T-Mobile US pay the Early Termination Fees (ETF) of new subscribers, or Uncarrier 6.0 introduced zero-rating downloads for music streaming.

The result was relevance. T-Mobile US challenged the status quo, creating value for customers which rivals weren’t, eventually forcing the industry to evolve. When Legere was first appointed as CEO, T-Mobile US had roughly 33.3 million subscribers, now it commands 84.18 million. In 2012, revenues stood at $15.9 billion for the 12 months, in 2018, this number increased to $43.3 billion.

What will be interesting to see is whether Sievert can follow-up the wild-eyed persona which Legere has made his own. Sievert is a believer in the Uncarrier strategy, he led the marketing campaigns as CMO prior to his appointment as COO, though Legere was the face of T-Mobile US as well as the mastermind of the grand plan.

For example, looking at the social media presence of Legere, his Twitter account has 6.5 million followers, while a quirky Christmas themed message on YouTube in 2015 was viewed 226,266 times. The energetic CEO even fronted a series of cooking videos under the hashtag #slowcookersunday, the lasted video attracted more than 4.8 million watches on Facebook. Legere is the company’s most valuable brand ambassador, and few can replicate the enthusiasm and genuine belief in the message. What impact this will have on the appeal of the newly-merged business remains to be seen.

The future of the T-Mobile US business is at a pivotal point right now. Once the merger gets rolling it will have to convince Sprint’s current subscriber base to stay as a customer of the newly-merged telco, instead of churning to a rival. Churn is unavoidable in this scenario, therefore it will be a case of damage limitation. Unfortunately, the T-Mobile brand will not be able to rely on one of its most powerful marketing assets before too long.

The T-Mobile loss is a significant gain for WeWork, presuming the rumours are true. Though we would now like to point you to a collection of videos from the combative, colourful and cunning John Legere.

Vodafone and Bharti set to raise prices help pay government bill

Beleaguered Indian operators Vodafone Idea and Bharti Airtel have indicated they will need to start charging their customers more.

Neither of them explicitly blamed the massive government bill they’ve been asked to pay for the unspecified price hike, but the fact that it has happened so soon after they got the bill and that they made the announcements almost simultaneously means it’s very unlikely to be a coincidence. The increase will kick in at the start of next month.

“To ensure that its customers continue to enjoy world class digital experiences, Vodafone Idea will suitably increase the prices of its tariffs effective December 1, 2019,” said Vodafone Idea in a statement to Business Standard. “The acute financial stress in the telecom sector has been acknowledged by all stakeholders and a high level Committee of Secretaries headed by the Cabinet Secretary is looking into providing appropriate relief.”

“The telecom sector is highly capital intensive with fast changing technology cycles that require continuing investments,” said Bharti Airtel in a statement to the Economic Times. “It is, therefore, extremely important that the industry remains viable to support the vision of Digital India. Accordingly, Airtel will appropriately increase price offerings in the month beginning December.”

Their nemesis Reliance Jio announced a month ago that it was going to start charging for stuff it had previously given away for free, which led to some muttering. Now that its competitors are also raising their prices it’s clear that the government cash grab will ultimately cost regular people. Vodafone and Bharti will be hoping their customers don’t punish them too much for this move, but it will surely lead to them losing some more business to Jio.

Reliance Comms board finally falls on its sword

Anil Ambani and four other board members have resigned, ten months after Reliance Communications filed for bankruptcy.

Chairman Anil Ambani, whose brother Mukesh is the person most responsible for the demise of RCom thanks to the creation of Reliance Jio, has finally decided to end his association with the decaying corpse of his company. Joining him in calling it a day are fellow board members Chhaya Virani, Ryna Karani, Manjari Kacker, Suresh Rangachar and CFO Manikantan V.

The news came in a filing with the Indian National Stock Exchange. Why the above board members hung around as long as they did is a mystery, but the ongoing carnage in the Indian telecoms sector, which has been exacerbated by the government’s remand that the legacy operators hand over billions of rupees in historical license fees.

Assuming that timing is more than a coincidence, it will be interesting to see what RCom’s creditors have to say about the move. According to the filing it’s in the power of a committee of creditors to accept or reject the resignations. If the directors are in any way personally liable for any of RCom’s debts then you would expect its creditors to be keeping a close eye on them.

Consolidation in the B2B CSP market with Ribbon and ECI set to merge

Two companies involved in providing communications services to other companies are merging to make a single bigger one.

Ribbon Communications focuses on cloud communications as a platform while EDI provides network solutions to companies like operators and cloud providers, so there’s a distinctly cloudy theme to this merger. Rather confusingly Ribbon says it’s acquiring ECI through a merger. Ribbon is handing over 32.5 million shares, which equates to around $130 million, as well as $324 in cash to mergaquire ECI.

“The ECI acquisition will extend Ribbon’s reach into the networking market and propel us into the global 5G market,” said Daryl Raiford, CFO of Ribbon. “ECI brings world class networking technology and a proven track record of success in winning top customers in direct competition with major industry players.

“Ribbon has long-standing, deep customer relationships in North America and Japan, which will provide immediate access to ECI solutions into these substantial markets. We believe this combination will create new revenue opportunities to drive growth, provide our customers and partners with a broader solutions portfolio, and generate significant long-term value for our stockholders.”

“We are excited to join forces with Ribbon, bringing together Ribbon’s and ECI’s rich portfolios of communications solutions,” said Darryl Edwards, CEO of ECI. Both companies enjoy a distinguished operating history and are trusted suppliers to the world’s leading telecommunication service providers and enterprises. We aim to create a powerhouse company that offers world-class products for an enhanced customer experience, benefiting our combined global customer base.”

“With ECI’s solid position and long history in the packet-optical transport markets, this acquisition makes sense for Ribbon on multiple fronts, giving Ribbon an entry into the early and growing 5G xHaul transport market while providing its combined customers with a full stack of solutions,” said Don (couldn’t they have found a Darrell?) Frey, Analyst at Ovum. “In addition to cross-selling opportunities, this proposed acquisition will give Ribbon a broad product line and enhance scale as a communications solutions vendor to service providers and enterprises.”

The market doesn’t seem to have such a rosy view of this move, however, with Ribbon’s shares down a whopping 20% at time of writing. Maybe it has something to do with Ribbon CEO Franklin Hobbs bailing on the day of the announcement. Presumably he didn’t think this was such a great idea either, so you can see why investors might be feeling a bit twitchy. They could also have tire of Ribbon’s apparent addiction to M&A in general

Huawei gives extra bonuses to staff that helped counter US sanctions

Embattled Chinese kit telecoms giant Huawei has decided to chuck a bunch of cash at its employees to thank them for hanging in there.

A bunch of different media have all claimed some kind of scoop over an internal email sent by Huawei HR to the entire company. The long and short of it seems to be that Huawei has decided to dish out two billion yuan in one-off bonuses to those staff considered to have done the most to counter the evil machinations of the US and its entity list. On top of that nearly every Huawei employee got double pay in October. Any employees that didn’t get either must be pretty unimpressed.

We haven’t been able to get anything official from Huawei, but have been assured that the reporting is legit. It looks like the R&D and supply chain teams directly involved in trying to find alternatives to the goods and services the US ban is preventing Huawei from accessing are getting most of the bonus pool, which will probably amount to around 100,000 yuan (£11,000) per employee.

Much of the reporting features anonymous insiders stressing how incredibly generous this is of Huawei, so the company is clearly milking its generosity for PR points. That doesn’t mean it’s not a smart move on its own merits, however. Not only will it help steady the nerves of its employees, it also sends out a message that money isn’t a problem in spite of the US doing its worst. Shame there are no bonuses being offered for excellence in telecoms reporting.

T-Mobile US merger with Sprint one step closer after FCC sign-off

Having secured a bunch of 5G network commitments, the US telecoms regulator has given its seal of approval to the merger of TMUS and Sprint.

The FCC had to make the usual judgment call when it comes to telecoms mergers of weighing up the reduction in competition with the increased investment power of the combined entity. As with apparently everything else in the US, the FCC is politicised and tribal. The three Republican Commissioners voted in favour, while the two republicans voted against.

To the winners go the spoils and the resulting announcement was heavy on the national benefits promised by ability of the combined entity to do a better job of rolling out a 5G network than the sum of its parts. The FCC (or at least the majority of it) is saying ‘the transaction will close the digital divide and promote the wide deployment of 5G services’. Let’s see.

“Specifically, T-Mobile and Sprint have committed within three years to deploy 5G service to cover 97% of the American people, and within six years to reach 99% of all Americans,” said the FCC announcement. “This commitment includes deploying 5G service to cover 85% of rural Americans within three years and 90% of rural Americans within six years.

“The parties also pledged that within six years, 90% of Americans would have access to mobile service with speeds of at least 100 Mbps and 99% of Americans would have access to speeds of at least 50 Mbps. This includes two-thirds of rural Americans having access to mobile service with speeds of at least 100 Mbps, and 90% of rural Americans having access to speeds of at least 50 Mbps.

“Compliance with these commitments will be verified by rigorous drive-testing, overseen by an independent third party and subject to Commission oversight, to ensure that the service Americans receive will be what the parties have promised. And in order to ensure that these commitments are met, the parties will be required to make payments that could reach over two billion dollars if they do not meet their commitments within six years. Moreover, the parties will be required to make additional payments until they have fulfilled their commitments.”

In their lengthy dissenting letter the two Democrat Commissioners stressed how little reassurance they take from these commitments. “The vague promise of 5G does not change what was true when this deal was first proposed and what remains true today—the benefits of this merger, if any, simply do not outweigh the harms,” wrote Commissioner Starks.

This still isn’t a done deal, however. It is the last of the federal obstacles but some individual states are pushing back and, by amazing coincidence, everyone involved seems to be of the Democrat persuasion. This is just how things work over there and the two companies will presumably need to dip further into the pork barrel to win those states over.

Having secured a bunch of 5G network commitments, the US telecoms regulator has given its seal of approval to the merger of TMUS and Sprint.

The FCC had to make the usual judgment call when it comes to telecoms mergers of weighing up the reduction in competition with the increased investment power of the combined entity. As with apparently everything else in the US, the FCC is politicised and tribal. The three Republican Commissioners voted in favour, while the two republicans voted against.

To the winners go the spoils and the resulting announcement was heavy on the national benefits promised by ability of the combined entity to do a better job of rolling out a 5G network than the sum of its parts. The FCC (or at least the majority of it) is saying ‘the transaction will close the digital divide and promote the wide deployment of 5G services’. Let’s see.

“Specifically, T-Mobile and Sprint have committed within three years to deploy 5G service to cover 97% of the American people, and within six years to reach 99% of all Americans,” said the FCC announcement. “This commitment includes deploying 5G service to cover 85% of rural Americans within three years and 90% of rural Americans within six years.

“The parties also pledged that within six years, 90% of Americans would have access to mobile service with speeds of at least 100 Mbps and 99% of Americans would have access to speeds of at least 50 Mbps. This includes two-thirds of rural Americans having access to mobile service with speeds of at least 100 Mbps, and 90% of rural Americans having access to speeds of at least 50 Mbps.

“Compliance with these commitments will be verified by rigorous drive-testing, overseen by an independent third party and subject to Commission oversight, to ensure that the service Americans receive will be what the parties have promised. And in order to ensure that these commitments are met, the parties will be required to make payments that could reach over two billion dollars if they do not meet their commitments within six years. Moreover, the parties will be required to make additional payments until they have fulfilled their commitments.”

In their lengthy dissenting letter the two Democrat Commissioners stressed how little reassurance they take from these commitments. “The vague promise of 5G does not change what was true when this deal was first proposed and what remains true today—the benefits of this merger, if any, simply do not outweigh the harms,” wrote Commissioner Starks.

This still isn’t a done deal, however. It is the last of the federal obstacles but some individual states are pushing back and, by amazing coincidence, everyone involved seems to be of the Democrat persuasion. This is just how things work over there and the two companies will presumably need to dip further into the pork barrel to win those states over. It’s a marathon, not a sprint.

Facebook rebrands as Facebook

Facebook is worried people might get confused between the service and the company because they’ve both got the same name.

The solution to this, apparently devised by Chief Marketing Officer Antonio Lucio, is to capitalise the name when referring to the company, as opposed to the service. “The new branding was designed for clarity, and uses custom typography and capitalization to create visual distinction between the company and app,” wrote Lucio.

The sudden need to make this distinction seems to come from a desire to appear transparent about the growing Facebook empire. Some US politicians have expressed regret that Facebook was allowed to buy WhatsApp and Instagram, resulting in it controlling a large proportion of the instant messaging and social media markets. Further attempts at expansion, such as the Libra cryptocurrency project, have further stoked those concerns.

So now other Facebook-owned services will feature the news capitalised logo more prominently, so people don’t get all confused. “This brand change is a way to better communicate our ownership structure to the people and businesses who use our services to connect, share, build community and grow their audiences,” explained Lucio.

Branding is an arcane business at the best of times. Companies seek to imbue letters and shapes with all sorts of spurious characteristics and connotations, but hardly anyone else cares. We won’t be capitalising Facebook when we write about it because that’s just silly. But if it’s really important for them that we do, we suggest that come up with a plausible eight-word acronym and we’ll think about it.

 

DT in legal battle over ownership of the colour magenta

Deutsche Telekom is testing out the resourcefulness of its lawyers in an attempt to own the colour magenta as it battles with Israeli insurance start-up Lemonade.

Shortly after launched the online-only insurance brand in the German market, a court injunction was filed by the telco with Lemonade being told to remove all branding with the offending colour. It does seem quite remarkable a company can ‘own’ a colour, but that it was the German courts have ruled.

Although the ruling is limited to the German markets for the moment, Lemonade is escalating the legal fracas to the European Union Intellectual Property Office to invalidate the decision. As with many legal decisions of this nature, there is the risk of precedent being set, with this ruling being used as a basis for future decisions in additional markets, though Lemonade wants to cut the monopoly down before any momentum can be gathered.

“At first we thought it was a joke,” Lemonade co-founder Shai Winiger said on Twitter.

“Turns out its anything but funny. So, we’re doing the one thing they least expect, by launching a legal attack against the ability of corporations to own things that should belong to humanity as a whole – like colours.”

What is slightly baffling about this case is the free-reign Deutsche Telekom has been handed by the courts. The patent doesn’t seem to be related to the use of magenta with certain letters, a concept, design or services, it apparently ‘owns’ magenta in Germany.

Launching the hashtag #FreethePink, the Lemonade team is challenging what seems to be a remarkable decision. The legal challenge is also generating a handy amount of PR for the business, which has its eyes set on international expansion after a positive start to life in Israel.

And as one would imagine, support on social media is gathering behind Lemonade with several users suggesting new targets for the telco to chase after. Perhaps the Pink Panther will be tackled next, or the hideous and slightly terrifying Troll Doll should start quaking it its boots. Maybe even Barney might be hauled out of retired to defend his tone, or if Deutsche Telekom fancies bullying children, it could take-on the Power Puff Girls.

Of course, this is not the first time Deutsche Telekom has attempted to use its legal weight to bully start-ups who dared to cross its colour palette. Dutch IT firm Compello felt the legal stick over the use of pink in its own logo, while dataJAR in the UK was also a victim.

Interestingly enough, in the case with Lemonade, the firm has not even been using the shade of pink Deutsche Telekom holds the patent for.

DT currently owns the patent for RAL 4010, a shade which is incredibly similar to the one being used by Lemonade, but not exactly the same. Following the ruling out of Germany, Lemonade has received a colour wheel from the telco, pointing out the colours it cannot use, one of which would be more readily described as Purple.

Although it might seem baffling a corporation can ‘own’ a colour outright, hopefully there will be some common sense shown by the European Union Intellectual Property Office and DT will be put in its place.

Revenues are down, but BT looks ready to do battle

Total revenues and profits might have slipped slightly at BT, though it met expectations and it seems the business is lining-up its pieces for an assault on the UK market.

With the assets the telco has at its disposal, BT should dominate the market leaving the scraps for rivals to fight over, but this has not been the case. There have been some lavish spending sprees over the last few years, though the refreshed management is taking a more network-orientated approach as opposed to the ‘bells and whistles’ of the previous regime.

“BT delivered results in line with our expectations for the second quarter and first half of the year, and we remain on track to meet our outlook for the full year,” said CEO Philip Jansen.

“We’ve invested to strengthen our competitive position. We’ve accelerated our 5G and FTTP rollouts, introduced an enhanced range of product and service initiatives for both consumer and business segments, and announced price and technology commitments to deliver fair, predictable and competitive pricing for customers.”

Capital expenditure for the first six months of 2019 was £1.88 billion, up £225 million year-on-year, although this excludes the grants from the Broadband Delivery UK (BDUK) programme. Such increase should come as little surprise as the team has been enthusiastically shouting about 5G launches across the UK (now up to 20) as well as new homes which are being passed with fibre (23,000 per week) in pursuit of the Government’s lofty full-fibre goals.

In years gone, BT looked like a telco which was defined by its challenge to Sky in the content market, while few could recognise the synergies with EE. The BT of today looks very different, thrusting the connectivity assets to the centre of the business. With the convergence business model proving its worth in various European markets, see success at Orange for evidence, BT is taking inspiration.

With the fixed network in the UK, which is being aggressively fibred-up, 30 million mobile subscribers, five million wifi hotspots and a new TV proposition to be launched at some undefined point, the cross-selling opportunities are abundant should BT be able to nail the experience on the assets. This seems to be the focus of investments under Jansen, instead of going for the glamorous, the team is concentrating on delivering the core connectivity experience and then bundling on additional added-value options.

Across the business, the Average Revenue per Consumer (ARPC) for broadband remained relatively flat at £38.5 per month, while postpaid mobile decreased to £20.8, down 5.5% though as this has been attributed to new regulation and the SIM-only trends it is nothing too be too concerned about. Interestingly enough, the number of Revenue Generating Units (RGUs) per household has increased to 2.38. This is where the convergence strategy could make a very positive impact.

As a business model, convergence is more efficient and creates higher customer loyalty and NPS. Bundled at a suitable price-point, and it looks like a very attractive offer to steal subscriptions from rivals also. However, experience does have to be very high across the entire portfolio, hence the increased spend on the network over recent months.

This is where BT could be a very interesting business over the next couple of months. The ‘Halo’ converged products could attract interest, especially when the hotspots are bundled in also. Rivals might be able to compete with BT with a few bundles, but no-one can offer the same breadth across mobile, broadband, wifi and content. This is a massive advantage, and BT should be shouting and screaming.

We might have to wait a couple of months before the refreshed TV proposition is fully polished, but this is another reason why no-one should worry too much about the slipping revenues for H1. BT is still lining up the various pieces before an aggressive push with the full convergence offer. It has been suggested the TV proposition will not be ready until the new year.

With its assets, BT should be untouchable. It still has work to do on the fibre rollout, 5G deployment, finalising the TV offer, improving the wifi experience and aligning the BT and EE brands, but the ‘Halo’ converged offer could create some serious noise.

2019 First Half Financials
Total Revenue £11.467 billion (1%)
Profit before tax £1.333 billion n/m
Profit after tax £1.068 billion n/m
Basic earnings per share 10.8p 2%
Capital expenditure £1.882 billion 3%
Business units
Consumer £5.194 billion (1%)
Enterprise £3.055 billion (5%)
Global Services £2.196 billion (6%)
Openreach £2.356 billion n/m

n/m = not-meaningful